O&G sector seen doing better
PETALING JAYA: The oil and gas (O&G) sector, whose second quarter (Q217) results came in line with analyst estimates, is poised to chart a better performance for the year on the back of improved crude oil prices, stronger sector contract flows and Petronas commitment to raise dividend payment for financial year 2017. (FY2017)
Analysts told StarBiz that the sector was on a cyclical recovery after bottoming out and expected contract flows to pick up in the fourth quarter.
They concurred that the commitment by the national oil company to up its dividend payment for FY17 is positive for the O&G sector. Many are bullish that oil prices will inch upwards by year-end or next year which would spur capital expenditure (capex) growth and revive upstream activities, adding that Q2 17 earnings were better year-onyear (y-o-y) due to downstream players.
Maybank IB Research is estimating oil price for this year to be at US$51.80 per barrel (bbl), noting that the sector has bottomed out and on a cyclical recovery.
“An accelerated rebalancing of the global crude oil market will spur capex growth. Our Economics Team’s crude oil price forecast is US$51.80/bbl average for 2017. Since global capex has been relatively flat y-o-y in 2017, a pick-up in spending would be an encouragement,’’ he noted.
It noted that Petronas’ RM60bil capital expenditure (capex) commitment for 2017 (20% y-o-y) is positive and the sector is slowly seeing a revival in upstream activities, ie rising drilling works.
The pipeline for tenders is also gradually filling up, of which most (ie offshore support vessel (OSV)) are back-loaded in the second half of this year. Maybank IB, which is maintaining its positive stance on the sector, said its four key stock buys are Dialog Group (a direct proxy to Petronas RAPID and Pengerang play), Sapura Energy Bhd (strong earnings visibility over the next three years, backed by the 600-million euro NS2 job) and Yinson Holdings Bhd (undemanding valuations with strong earnings growth prospects, cashflow strength and proven execution capabilities).